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An aggressive web strategy pays off as online sales grow by 37%.
Nordstrom Inc. reports strong growth in 2012, led by e-commerce. The company’s direct sales segment, virtually all of which is online, “is our fastest-growing channel and it is expanding our reach to existing and new customers,” president Blake Nordstrom told analysts on the chain retailer’s recent year-end earnings call. “We see substantial opportunities for outsized growth to continue as we further improve the online customer experience.”
For the 2012 fiscal year ended Feb. 2, Nordstrom, No. 31 in the Internet Retailer Top 500, reported:
- E-commerce sales of $1.3 billion, a 37% increase from about $948.9 million in fiscal 2011. Web sales for 2012 do not include those for flash-sale site HauteLook.com, which Nordstrom acquired in 2011. Sales for HauteLook grew about 40%, the company said.
- Total sales of $11.76 billion, up by 12.1% from $10.49 billion.
- Comparable-store sales increased 7.3%.
- Net income of $735 million, a 7.6% increase from net income of $683 million in fiscal 2011.
The web accounted for 11.1% of sales for the year, compared with 9.0% in fiscal 2011. E-commerce represented about $351.1 million, or 27.6%, of about $1.27 billion in sales growth for the year.
Nordstrom’s overall 2012 strategy was heavily weighted toward e-commerce and included building out its information technology infrastructure, enhancing customers’ web and mobile experience, expanding online merchandise selection, and adding to the functionality of mobile point-of-sale devices and expanding their deployment in full-line and Nordstrom Rack stores, Nordstrom said.
That strategy led to such web site improvements in 2012 as enhanced search, navigation and checkout, and features including updated recommendations and 360-degree video on certain web site product pages. “We've improved the speed of fulfillment and delivery and we provided early access online to our anniversary sale,” Nordstrom told analysts. “Going forward, we plan to further elevate the shopping experience with features that provide more interaction and personalization.”
Mobile devices are becoming a major factor in the company’s direct sales segment, Nordstrom said. “On an average day, more than 100,000 unique customers access Nordstrom on a mobile device, with nearly twice that amount during the holidays,” he said. In 2012, sales from a mobile device accounted for over 20%—more than $260 million—of the company’s total direct sales, he said, compared to less than 4% in 2010.”
The retailer has had a mobile commerce site since 2009 and in late 2011 rolled out an iPhone app.
Web and mobile site upgrades were made almost completely by in-house technology staff, a company spokesman says.
Nordstrom didn’t offer specific numbers but noted the company’s online merchandise selection expanded by over 50% in 2012 and is now on par with its full-line store selection.
The company’s capital investment accounted for about $2 billion over the past five years and will nearly double to $3.7 billion in the coming five years, chief financial officer Michael Koppel told analysts on the earnings call. “We plan to nearly double our capital expenditures relative to the last five years, due to investments in Canada, Manhattan, e-commerce and Rack,” Koppel said.
Nordstrom announced in 2012 an initial plan to expand into Canada by opening four full-line stores, though it has not said when the stores would open. The ultimate plan is to reach eight to 10 full-line stores and 15-20 Rack stores, Blake Nordstrom said. Karen McKibben was named president of Nordstrom Canada, he said.
The company also is working to open its first store in Manhattan. A site near Columbus Circle in Manhattan has been chosen for the company’s first full-line store in the heart of New York City, and that store is scheduled to open in 2018.
The company is allocating about 25%, or $925 million, during that period to e-commerce and technology including initiatives to improve e-commerce delivery and fulfillment, online and mobile experience and personalization, he said. About 20%, or $740 million, will go toward entry into Canada and Manhattan, and roughly 55%—$2.04 billion—is earmarked for a combination of new full-line stores, Rack stores and remodels.
Nordstrom didn’t break out web sales for the fourth quarter, but did report:
- Total sales were $3.596 billion, a 13.5% increase from $3.169 billion last year.
- Comparable-store sales, which include full-line stores and e-commerce, increased 6.1%.
- Full-line same-store sales alone increased by 2.2%.
- Net income of $284 million, up by 20.3% from net income of $236 million in Q4 2011.